5 US dividend stocks to watch in November 2023: from FMCG to IT
Dividends are sometimes overlooked by investors. But they can play an important role in a balanced investment portfolio.
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Stocks that pay dividends are sometimes treated with scepticism by long-term investors.
There are a number of reasons why, including the perceived cost-to-value ratio, the relatively low growth and the potential for increased tax.
But is this scepticism always justified?
After all, when used judiciously, dividend stocks can offer investors a range of advantages.
We spoke to Josh Gilbert, market analyst at eToro, to get his insights on dividend stocks.
"The power of dividends is underestimated by most investors, with income often only thought about in retirement," says Gilbert.
However, Gilbert notes that when dividends are being paid, it can be a sign of other positive qualities within a company.
"Companies that often pay reliable dividends are stable, profitable companies," says Gilbert.
"Not only do you benefit from the capital gains, when the share price increases, but you will also receive an income yield when the company pays its dividend."
Reinvesting dividends into an index can also make a huge difference over the course of many years. Gilbert points to the S&P 500 over the last 20 years as an example.
"It returned 376% in that time, but with dividends reinvested in the index, the return would be 606%," says Gilbert.
Gilbert notes that this compounding effect is one of the key reasons he tends to encourage investing from a young age.
"The earlier you start investing, the more you will benefit from compounding over the long term," he says.
Current stocks yielding dividends
eToro's Dividend Growth Portfolio includes all 5 of the stocks named below, as well as a number of other significant companies.
"The portfolio consists of high-quality, dividend-paying companies that have paid increasing dividends for at least 20 consecutive years," says Gilbert.
One of the heavyweights of the FMCG space, Coca-Cola is a company known across the globe.
With a global presence, strong portfolio of brands and products, Coca-Cola is broadly considered a stable investment for those looking for dividends in their portfolio.
Current yield: 3.24%
As the seventh-largest retailer in the US, Target Corp has a significant physical and online presence across the North American continent.
Though physical retail trading has had its downturns in recent years, a healthy online division and wide brand recognition continues to place Target as a major player.
Current yield: 4.06%
A major retail real estate investment trust, National Retail Properties, Inc. currently owns more than 3,000 properties across 48 states in the USA.
Current yield: 5.92%
A global distributor of pharmaceuticals and other healthcare products, Cardinal Health also has distribution ties to major US retailers like CVS and Walgreens.
Current yield: 1.92%
Though the company is best-known worldwide for its calculators, Texas Instruments is actually one of the largest semiconductor manufacturers in the world.
This has made Texas Instruments a major player in the wider world of tech. With a long history of sound returns and a strong position in the market, Texas Instruments are generally seen as stable and reliable investment.
Current yield: 3.4%
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Getting started with dividend stocks
So, if you're thinking about adding dividend stocks to your portfolio, where should you begin?
First of all, you'll need a trading platform.
Ideally, you'll opt for one that allows you to trade across a range of different markets.
This will allow you access to a broader range of industries than offered on the Australian Stock Exchange (ASX), which in turn provides access to a broader range of dividend stocks.
As an example, eToro allows you to trade across 16 markets around the world.
Additionally, eToro offers a Demo Account when you first sign up. This allows you to use up to $100,000 of virtual funds, making sales and trades on a simulation tied to real-world market values.
This way, you're able to test out a range of strategies before putting any real-world money at risk.
The Copy Trading feature also allows you to duplicate the strategies of other successful traders, too.
Though – in theory – dividends can be offered by almost any company, there are certain industries where they have greater prominence.
"It's good for investors to look at various market sectors, tech and growth, finance and energy, real estate and small-caps, and dividend stocks can be a great option to add to a diversified portfolio," says Gilbert.
This is not to say they're automatically immune to the other vagaries of the market, of course. Gilbert is quick to note that issues like the pandemic, geopolitical tensions and inflation can still have significant impacts on markets.
However, he also notes the value of having a broad portfolio across dividend-yielding stocks.
"Investors who were heavily diversified will have fared much better, as they weren't overexposed to one industry," says Gilbert.
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